Paxton steps up fight against SEC lawsuit alleging he committed fraud

Updated 4:55 pm, Friday, June 10, 2016

AUSTIN -- Texas Attorney General Ken Paxton's legal team filed a motion Thursday seeking to end the federal government's civil lawsuit accusing him of securities fraud.

The lawsuit, which was initiated in April by the U.S. Securities and Exchange Commission, alleges that before he became attorney general, Paxton pressured friends to invest nearly $1 million in a Collin County technology startup called Servergy, Inc., without telling them that he was being paid to promote the company.

In a 38-page motion, Paxton's lawyers said the case should be dismissed, in part because, they said, he did not have an obligation to disclose that information.

The motion also argued the federal government did not accuse Paxton of making any false statements; that the federal government did not allege that any investors lost any money; and that Paxton himself was deceived by the founder of Servergy.

"The SEC's legal theory -- that Mr. Paxton failed to disclose certain information to investors -- has been repeatedly rejected by the U.S. Supreme Court for nearly 30 years," the legal team said in a news release.

The news release also announced that Paxton had hired former SEC official Matt Martens as his top lawyer to fight the civil lawsuit.

Experts said Paxton will have a hard time fighting the suit. Numbers show that when the SEC files a case alleging fraud, it almost never loses.

The allegations are nearly identical to those that Paxton is also fighting in the state criminal system. Paxton was indicted last year and has so far been unable to get the charges thrown out. Last month, an appeals court upheld the indictment.